Section 706, Wild Assumptions, and Regulatory Restraint

I was pleased that Federal Communications Commissioner Michael O’Rielly accepted my invitation to participate as a keynoter at the Free State Foundation’s Sixth Annual Telecom Policy Conference on March 18. We engaged in an informative and interesting lunchtime conversation, and I am grateful to Commissioner O’Rielly for indulging my questions.

I’m also grateful that C-SPAN broadcast the entire FSF conference. You can find the video of my conversation with Commissioner O’Rielly here.

I commend to you the entire conversation. But for now I just want to focus on Commissioner O’Rielly’s discussion of Congress’s intended meaning of now-famous Section 706 of the Telecommunications Act of 1996. In the post-D.C. Circuit Verizon case world, Section 706 is considered to be an independent source of authority for the FCC to regulate broadband Internet providers (and perhaps other market participants as well, the so-called “edge” providers). Tom Wheeler, the FCC’s Chairman, has announced that the Commission will look to Section 706 for authority as it considers whether to adopt new non-discrimination and no-blocking rules, along with other regulatory actions.

Before taking his seat at the Commission, Commissioner O’Rielly spent almost twenty years in various congressional staff positions. At the time the Telecom Act of 1996 was being drafted, Commissioner O’Rielly served on the House Energy and Commerce Committee staff. According to his account, he was closely involved in the negotiations leading up to passage of the 1996 Act. In other words, as I said during our exchange, Commissioner O’Rielly had a “bird’s eye” view of the drafting process, including that relating to Section 706.

To my mind, this makes what he has to say about his understanding of Section 706 worth contemplating – seriously.

As recounted by Commissioner O’Rielly, in order to accept the court’s (and the FCC’s new) interpretation of what Section 706 means, you would have to make “some wild assumptions.”

· You would have to believe that a Republican Congress with a deregulatory mandate inserted very vague language into the statute to give complete authority over the Internet and broadband to the FCC, but then didn’t tell a soul. It didn’t show up in the writings, it didn’t show up in the summaries. It didn’t show up in any of the stories at the time.

· You would have to believe that the conference committee intended to codify Section 706 outside of the Communications Act, thereby separating it from the enforcement provisions of the Act, Title V, but somehow we still expected it to be enforced. [The Communications Act was not amended to include Section 706.]

· You would have to believe that the congressional committees that went on to do an extensive review of FCC authority afterwards, and even proposed legislation to rein it in, in terms of FCC reauthorization legislation, that they went through that effort, but at the same time they had provided a secret loophole to the Commission to regulate.

· You would have to believe that when Congress is having extensive debates over the ability to regulate, or the ability to give the Commission authority to regulate net neutrality, at the same time they had already given the Commission this authority.

· You would have to believe that when Congress did legislate in this space, and more particularly when they legislated on certain edge providers in certain narrow instances mostly related to public safety, you would have to believe that they went through that extensive process, and then it didn’t matter, the fact that they had already given the Commission that complete authority under Section 706.

Commissioner O’Rielly’s conclusion: “It’s mindboggling to believe that all of those assumptions, and there are many more, are true. You would have to suspend your rational thought to get to that point.” [The bullet points above are close to verbatim, but please feel free to listen to Commissioner O’Rielly in his own words directly in the video.]

I don’t want to suggest that Commissioner O’Rielly’s recounting of his personal knowledge of what went on behind the scenes as the 1996 Act was written, itself, should be considered determinative for a court construing Section 706. And I don’t think Commissioner O’Rielly means to suggest that his personal recollections constitute official legislative history. Rather, the importance of what he relates is to show the irrationality – the arbitrariness and capriciousness, if you will, in administrative law terms – of adopting a novel interpretation of Section 706 that necessarily is based on so many implausible assumptions.

Commissioner O’Rielly’s persuasive recounting shows that the court’s – and now, apparently, the FCC Chairman’s – interpretation of Section 706 not only is implausible, but far afield from what was widely understood to be the provision’s original meaning – that the provision was not intended to constitute an independent grant of affirmative regulatory authority. Recall that this was the Commission’s own understanding of Section 706 as well until the agency switched its view after its first foray into net neutrality regulation met with defeat in Comcast Corp. v. FCC.

In providing a convincing account of what Congress intended – and did not intend – Section 706 to mean, Commissioner O’Rielly has performed a valuable service. Even though, for now, the D.C. Circuit panel’s opinion remains the controlling interpretation, it is important to remember that, other than holding unlawful the no-blocking and no-discrimination net neutrality rules, the court did not purport to define the boundaries of the Commission’s Section 706 authority or adjudicate any particular exercises of such authority. The court did not require the agency to adopt any new regulations. Under all the circumstances – and especially the circumstance that there is no evidence of a present market failure or consumer harm resulting from Internet provider practices – there is no reason for the Commission to move forward at this time to adopt new net neutrality or net neutrality-like rules.

Indeed, under the circumstances, and having in mind the doubt cast on the validity of the D.C. Circuit’s Section 706 reasoning by Commissioner O’Rielly’s recounting, shouldn’t this be an occasion for the FCC to exercise some (rare) regulatory humility?

In my view, it should be. The FCC Chairman should announce that the Commission will stand down and, as far as attempts to revive net neutrality regulations go, engage in watchful waiting. To adopt such a posture of regulatory restraint would not be a sign of weakness, but rather of wisdom.

Randolph May is President of The Free State Foundation. Prior to founding The Free State Foundation, he served as a Senior Fellow and Director of Communications Policy Studies at the Progress and Freedom Foundation from October 1999-May 2006. From 1978 to 1981, Mr. May served as Assistant General Counsel and Associate General Counsel at the Federal Communication Commission, and he subsequently practiced communications and administrative law. He has held numerous leadership positions in bar associations. He is a member of the House of Delegates of the American Bar Association and past Chair of the ABA's Section of Administrative Law and Regulatory Practice. He is a Fellow of the National Academy of Public Administration. Mr. May is also a Public Member of the Administrative Conference of the United States. He writes on regulatory affairs for the National Law Journal. In addition, he is the author of one book and the editor or co-editor of four books on communications law and policy, and he has published more than one hundred and fifty articles and essays on communications, administrative and constitutional law topics. Mr. May is an adjunct professor of law at George Mason University School of Law. He received his B.A. from Duke University and his J.D. from Duke Law School, where he serves as a member of the Board of Visitors.